Understanding Bull And Bear Market Situations

Summary:This section of the site discusses what are, and
how should an investor behave, in both bull and bear markets. Useful
information relating to bear markets is not easy to find and we hope to
begin your education about this frightening market and point you in the
direction of important further reading.

Understanding some of the basic facts about bull and bear market
behaviour and charachteristics is sound advice that any newcomer should
follow.

Clearly, the movements and underlying economics of each type of
market is very different from each other and is discussed in this
section of the site.

For many investors, especially relatively new ones(and, it seems, many investment bankers), the current
market situation - no matter what it may be - can appear to be the way
that stock markets have always been. However, this isn't the case. Over
the years - and the US market has been in existence in one form or
another for over 100 of them - there have been some violent movements in
price and prolonged periods of both prosperity and despair.

It should be noted that in trying to analyse both bull and bear
market features, no two have been the same. They almost certainly last
for differing periods of time, are caused by different things, require
different investment strategies and can create and destroy wealth in
different ways.

They also reflect the expansion and boom in economic activity at the time. Since we humans keep inventing new ways to overreach financially on the way up, we will continue to discover new routes down again.

In other words, understanding how either a bull or a bear market might work and move is very important.

For example, there are many people that believe that when a market has been rising strongly for some time, but then starts to show increased volatility (the prices jump around more than normal), which is usually visible in the VIX, then there is weakness in prices. They view this as a predictor of the market top and falling prices.

Unfortunately, here at StockExchangeSecrets.com we do not have a crystal
ball that will perfectly define or predict coming rises or falls in
markets. We wish we did have! Instead, we shall try and provide a brief
but useful overview of these important terms and conditions.

It is also worth pointing out that the vast majority of thinking and writing about investment markets focuses on the long side - expansion and prosperity. This probably mirrors the human mind as we are all optimistic about the future.

Additionally, financial advisers, wealth managers and Wall Street more generally, are in the business of selling the wealthy dream lifestyle. That image existing in our heads is not one that involves sharp corrections, falling prices and margin calls - though that can be the reality for many people. Therefore, there is also a form of institutionalised optimism about rising stock prices.

However, corrections and recessions where prices fall and growth comes to an end are very common. Not only are major setbacks common on Wall Street and elsewhere, but the reverse in prices is often between 30% and 50% from the peak. That is a lot of investor wealth that can be lost when the NYSE and NASDAQ turn direction. On top of this, most major asset classes are not as diversified as we might hope, meaning that when the world's stock exchanges reverse, prices also often fall in emerging markets, bond prices and some commodities.

Therefore, it pays all private investors to know and understand bull and bear markets more than they do, with a special focus on falling prices and a slowing economy.